How Should a Court Determine Damages If My Contract Is Breached?
O'Connor Construction Company v. Belmont Harbor Home Development is a classic case in construction dispute damages. The plaintiff filed a mechanics lien against a condominium project after the developer refused to let it complete the project. O'Connor had been the carpentry subcontractor responsible for blocking and for trim finishing. It completed most of its work under its contract and had been asked to work, contrary to the contract, to finish the units as units were sold rather than finishing the project as a whole.
After a dispute over payment applications, O'Connor requested that the developer deliver the materials it needed to complete the project in a timely fashion, and the developer failed to supply the needed materials in a timely way. O'Connor then filed a mechanics lien for the amount it was owed under its contract and refused the developer's demand to rescind the lien. When O'Connor would not rescind its lien, the general contractor terminated the contract with O'Connor.
The facts in the trial court showed that O'Connor's contract price plus extras was $351,989.00. This is what O’Connor would have been paid under its contract if the contract had been completed. It also showed that O'Connor had been paid $175,189.50. The trial court found that O'Connor had substantially completed its contract and that the cost to finish the contract for work that was not performed after O’Connor was let go was $41,200. Using a method of calculating damages that would award damages for the benefit received by the developer from O'Connor's work, the trial court found that O'Connor was owed $50,876.50. On appeal, the appellate court found that this was the wrong measure for damages in both a mechanics lien action and a breach-of-contract action.
The appellate court found that the proper measure of damages owed to O'Connor would be $351,989.00 O'Connor would have received had it been allowed to finish the project minus the $175,189.50 that O'Connor had been paid, and also less the $41,200 it would cost the defendants to finish the work O'Connor was in not allowed to complete. This is in stark contrast with the $50,876.50 figure the trial court had awarded. The appellate court also found that under the mechanics lien statute O'Connor was allowed its attorneys fees where a portion of the payment that O'Connor was owed had not been turned over, and the defendants testified that it was due to O'Connor.
Also worth noting in the opinion is the fact that the mechanics lien statute provides interest at 10% per annum, which was greater than the 5% per annum O'Connor could expect under its contract. As we’ve said before, along with the Contractor Prompt Payment Act the mechanics Lien act provides any party who has not been paid a powerful tool and obtaining payment for services rendered. Knowing that in a fixed-price contract, there is a certain expectation you may have when someone else breaches your contract, using the mechanics in statute to get that payment back allows you a remedy that you otherwise might not have… and awards damages in a manner similar to contractual damages and possibly not just for damages in line with the benefit someone has received from your work.
In a day and age when attorneys fees can become a considerable hindrance to the prospect of recovering on low-cost contracts – it is worth noting that payment held without just cause can entitle someone to remuneration for the fees of having to bring a court action under the statute.
